NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include the accounts of Avid Technology, Inc. and its wholly owned subsidiaries (collectively, “Avid” or the “Company”). These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of operations, comprehensive income (loss), financial position and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated balance sheet as of
December 31, 2016
was derived from the Company’s audited consolidated financial statements and does not include all disclosures required by U.S. GAAP for annual financial statements. The Company filed audited consolidated financial statements as of and for the year ended
December 31, 2016
in its Annual Report on Form 10-K for the year ended
December 31, 2016
, which included information and footnotes necessary for such presentation. The financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2016
.
The Company’s preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from the Company’s estimates.
The Company has generally funded operations in recent years through the use of existing cash balances, supplemented from time to time with the proceeds of long-term debt and borrowings under its credit facilities. The Company’s principal sources of liquidity include cash and cash equivalents totaling
$44.1 million
as of
September 30, 2017
.
In February 2016, the Company committed to a cost efficiency program that encompassed a series of measures intended to allow the Company to more efficiently operate in a leaner, more directed cost structure. These measures included reductions in the Company’s workforce, consolidation of facilities, transfers of certain business processes to lower cost regions and reductions in other third-party service costs. The cost efficiency program was substantially complete as of June 30, 2017.
In connection with the cost efficiency program, on February 26, 2016, the Company entered into a Financing Agreement (the “Financing Agreement”) with the lenders party thereto (the “Lenders”). Pursuant to the Financing Agreement, the Company entered into a term loan in the original aggregate principal amount of
$100.0 million
. The Financing Agreement also originally provided the Company with the ability to draw up to a maximum of
$5.0 million
in revolving credit. All outstanding loans under the Financing Agreement will become due and payable in February 2021, or in May 2020 if the
$125.0 million
in outstanding principal of
2.00%
convertible senior notes due June 15, 2020 (the “Notes”) has not been repaid or refinanced by such time.
The Financing Agreement contains customary representations and warranties, covenants, mandatory prepayments, and events of default under which the Company’s payment obligations may be accelerated. On March 14, 2017 (the “Amendment No. 1 Effective Date”), the Company entered into an amendment (the “First Amendment”) to the Financing Agreement. The First Amendment modified the covenant requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) total funded indebtedness to (b) consolidated EBITDA) such that following the Amendment No. 1 Effective Date, the Company is required to maintain a Leverage Ratio of no greater than 3.50:1.00 for the four quarters ended March 31, 2017, 4.20:1.00 for the four quarters ended June 30, 2017, 4.75:1.00 for the four quarters ended September 30, 2017, 4.80:1.00 for the four quarters ending December 31, 2017, 4:40:1.00 for each of the four quarters ending March 31, 2018 through March 31, 2019, respectively, and thereafter declining over time from 3.50:1.00 to 2.50:1.00.
Following the Amendment No. 1 Effective Date, interest accrues on outstanding borrowings under the credit facility and the term loan (each as defined in the Financing Agreement) at a rate of either the LIBOR Rate (as defined in
the Financing Agreement) plus 7.25% or a Reference Rate (as defined in the Financing Agreement) plus 6.25%, at the option of the Company.
As of
September 30, 2017
, the Company was in compliance with the Financing Agreement covenants.
On November 9, 2017 (the “Amendment No. 2 Effective Date”), the Company entered into an amendment (the “Second Amendment”) to the Financing Agreement. The Second Amendment extended an additional $
15.0 million
term loan to the Company, thereby increasing the aggregate principal amount of the term loan to $
115.0 million
. The Second Amendment also increased the amount of available revolving credit by $
5.0 million
to an aggregate amount of $
10.0 million
. The additional $
15.0 million
term loan must be repaid in quarterly principal payments of $
187,500
commencing in March 2018. The Second Amendment also granted the Company the ability to use up to $
15.0 million
to purchase Notes and modified the definition of consolidated EBITDA used in the Leverage Ratio calculation to adjust for expected changes in deferred revenue due to the adoption of Accounting Standards Codification (“ASC”) Topic 606, the new revenue recognition guidance.
The Company’s ability to satisfy the Leverage Ratio covenant in the future is dependent on its ability to maintain bookings and billings at or above levels experienced over the last 12 months. In recent quarters, the Company has experienced volatility in bookings and billings resulting from, among other things, (i) its transition towards subscription and recurring revenue streams and the resulting decline in traditional upfront product sales, (ii) volatility in currency rates and in particular the U.S. dollar against the Euro, (iii) significant changes and trends in the media industry and the impact they have had on the Company’s customers and (iv) the impact of new and anticipated product launches and features. In addition to the impact of new bookings and billings, U.S. GAAP revenues recognized as the result of the existence of Implied Maintenance Release PCS (as defined below) will be significantly lower in the remainder of 2017, as compared to 2016 periods, which will have an adverse impact on the Company’s Leverage Ratio.
In the event bookings and billings in future quarters are lower than the Company currently anticipates, the Company may be forced to take remedial actions which could include, among other things (and where allowed by the Lenders), (i) further cost reductions, (ii) seeking replacement financing, (iii) raising funds through the issuance of additional equity or debt securities or the incurrence of additional borrowings, or (iv) disposing of certain assets or businesses. Such remedial actions, which may not be available on favorable terms or at all, could have a material adverse impact on the Company’s business. If the Company is not in compliance with the Leverage Ratio and is unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Financing Agreement, which could permit acceleration of the outstanding indebtedness under the Financing Agreement and require the Company to repay such indebtedness before the scheduled due date. If an event of default were to occur, the Company might not have sufficient funds available to make the payments required. If the Company is unable to repay amounts owed, the lenders may be entitled to foreclose on and sell substantially all of the Company’s assets, which secure its borrowings under the Financing Agreement.
On January 26, 2017, the Company entered into an exclusive distributor agreement (the “Distributor Agreement”) with Beijing Jetsen Technology Co., Ltd. (“Jetsen”), pursuant to which Jetsen became the exclusive distributor for Avid products and services in the greater China region. The Distributor Agreement has a
five
-year term, and Jetsen is required to make at least
$75.8 million
of aggregate purchases under the agreement over the first three years. At the same time, the Company also entered into a securities purchase agreement (the “Securities Purchase Agreement”), with Jetsen, pursuant to which it agreed to sell to Jetsen shares of Avid common stock. In June 2017, Avid and Jetsen amended the Securities Purchase Agreement. Under the amended terms, Jetsen will invest
$18.2 million
in Avid, in return for a minority stake in the Company of between
4.5%
and
8.9%
of Avid outstanding common stock on a fully diluted basis. The closing of the investment is subject to closing conditions, including China regulatory approvals. In the event regulatory approval is not obtained in the fourth quarter of 2017, either party may elect to terminate the Securities Purchase Agreement for any reason. The exact number of shares to be issued and sold at closing will be determined by reference to the trading price of Avid common stock before closing.
The Company’s cash requirements vary depending on factors such as the growth of its business, changes in working capital, and capital expenditures. Management expects to operate the business and execute its strategic initiatives principally with funds generated from operations, remaining net proceeds from the term loan borrowings under the Financing Agreement and draw up to a maximum of
$10.0 million
under the Financing Agreement’s revolving credit facility. Management anticipates that the Company will have sufficient internal and external sources of liquidity to fund operations and anticipated working capital and other expected cash needs for at least the next 12 months, as well as for the foreseeable future.
Subsequent Events
The Company evaluated subsequent events through the date of issuance of these financial statements and, except for the subsequent events disclosed above and in Note 7 and Note 10, no subsequent events required recognition or disclosure in these financial statements.
Significant Accounting Policies - Revenue Recognition
General
The Company commences revenue recognition when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is reasonably assured. Generally, the products the Company sells do not require significant production, modification or customization. Installation of the Company’s products is generally routine, consists of implementation and configuration and does not have to be performed by the Company.
At the time of a sales transaction, the Company makes an assessment of the collectability of the amount due from the customer. Revenues are recognized only if it is reasonably assured that collection will occur. When making this assessment, the Company considers customer credit-worthiness and historical payment experience. If it is determined from the outset of the arrangement that collection is not reasonably assured, revenues are recognized on a cash basis, provided that all other revenue recognition criteria are satisfied. At the outset of the arrangement, the Company also assesses whether the fee associated with the order is fixed or determinable and free of contingencies or significant uncertainties. When assessing whether the fee is fixed or determinable, the Company considers the payment terms of the transaction, the Company’s collection experience in similar transactions and the Company’s involvement, if any, in third-party financing transactions, among other factors. If the fee is not fixed or determinable, revenues are recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met. If a significant portion of the fee is due after the Company’s normal payment terms, the Company evaluates whether the Company has sufficient history of successfully collecting past transactions with similar terms without offering concessions. If that collection history is sufficient, revenue recognition commences, upon delivery of the products, assuming all other revenue recognition criteria are satisfied. If the Company was to make different judgments or assumptions about any of these matters, it could cause a material increase or decrease in the amount of revenues reported in a particular period.
The Company often receives multiple purchase orders or contracts from a single customer or a group of related customers that are evaluated to determine if they are, in effect, part of a single arrangement. In situations when the Company has concluded that two or more orders with the same customer are so closely related that they are, in effect, parts of a single arrangement, the Company accounts for those orders as a single arrangement for revenue recognition purposes. In other circumstances, when the Company has concluded that two or more orders with the same customer are independent buying decisions, such as an earlier purchase of a product and a subsequent purchase of a software upgrade or maintenance contract, the Company accounts for those orders as separate arrangements for revenue recognition purposes.
For many of its products, the Company has had an ongoing practice of making available, at no charge to customers, minor feature and compatibility enhancements as well as bug fixes on a when-and-if-available basis (collectively “Software Updates”), for a period of time after initial sales to end users. The implicit obligation to make such Software Updates available to customers over a period of time represents implied post-contract customer support, which is deemed to be a deliverable in each arrangement and is accounted for as a separate element (“Implied Maintenance Release PCS”).
Over the last two years, in connection with a strategic initiative to increase support and other recurring revenue streams, the Company has taken a number of steps to eliminate the longstanding practice of providing Implied Maintenance Release
PCS for many of its products, including Media Composer, Pro Tools and Sibelius product lines. In the third quarter and fourth quarter of 2015, respectively, the Company concluded that Implied Maintenance Release PCS for its Media Composer and Sibelius product lines had ceased. In the first quarter of 2016, in connection with the release of Cloud Collaboration in Pro Tools version 12.5, which was an undelivered feature that had prevented the Company from recognizing any revenue related to new Pro Tools 12 software sales as it represented a specified upgrade right for which vendor specific objective evidence (“VSOE”) of fair value was not available,
the Company concluded that Implied Maintenance Release PCS for Pro Tools 12 product lines had also ended. As a result of the conclusion that Implied Maintenance Release PCS on Pro Tools 12 has ended, revenue and net income in the first quarter of 2016 increased approximately
$11.1 million
, reflecting the recognition of orders received after the launch of Pro Tools 12 that would have qualified for earlier recognition using the residual method of accounting. In addition, the elimination of Implied Maintenance Release PCS also resulted in the accelerated recognition of maintenance and product revenues that were previously being recognized on a ratable basis over a much longer expected period of Implied Maintenance Release PCS rather than the contractual maintenance period. The reduction in the estimated amortization period of transactions being recognized on a ratable basis resulted in an additional
$12.0 million
and
$33.7 million
of revenue during the
three and nine months ended
September 30, 2016
, respectively.
The Company enters into certain contractual arrangements that have multiple elements, one or more of which may be delivered subsequent to the delivery of other elements. These multiple-deliverable arrangements may include products, support, training, professional services and Implied Maintenance Release PCS. For these multiple-element arrangements, the Company allocates revenue to each deliverable of the arrangement based on the relative selling prices of the deliverables. In such circumstances, the Company first determines the selling price of each deliverable based on (i) VSOE of fair value if that exists, (ii) third-party evidence of selling price (“TPE”), when VSOE does not exist, or (iii) best estimate of the selling price (“BESP”), when neither VSOE nor TPE exists. Revenue is then allocated to the non-software deliverables as a group and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the selling price hierarchy. The Company’s process for determining BESP for deliverables for which VSOE or TPE does not exist involves significant management judgment. In determining BESP, the Company considers a number of data points, including:
|
|
•
|
the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone basis;
|
|
|
•
|
contractually stated prices for deliverables that are intended to be sold on a standalone basis;
|
|
|
•
|
the pricing of standalone sales that may not qualify as VSOE of fair value due to limited volumes or variation in prices; and
|
|
|
•
|
other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the customer size and type.
|
In determining a BESP for Implied Maintenance Release PCS, which the Company does not sell separately, the Company considers (i) the service period for the Implied Maintenance Release PCS, (ii) the differential in value of the Implied Maintenance Release PCS deliverable compared to a full support contract, (iii) the likely list price that would have resulted from the Company’s established pricing practices had the deliverable been offered separately and (iv) the prices a customer would likely be willing to pay.
The Company estimates the service period of Implied Maintenance Release PCS based on the length of time the product version purchased by the customer is planned to be supported with Software Updates. If facts and circumstances indicate that the original service period of Implied Maintenance Release PCS for a product has changed significantly after original revenue recognition has commenced, the Company will modify the remaining estimated service period accordingly and recognize the then-remaining deferred revenue balance over the revised service period.
The Company has established VSOE of fair value for some of the Company’s professional services, training and support offerings. The Company’s policy for establishing VSOE of fair value consists of evaluating standalone sales to determine if a substantial portion of the transactions fall within a reasonable range. If a sufficient volume of standalone sales exist and the standalone pricing for a substantial portion of the transactions falls within a reasonable range, management concludes that VSOE of fair value exists.
In accordance with Accounting Standards Update (“ASU”) No. 2009-14, the Company excludes from the scope of software revenue recognition requirements the Company’s sales of tangible products that contain both software and non-software components that function together to deliver the essential functionality of the tangible products. The Company adopted ASU No. 2009-13 and ASU No. 2009-14 prospectively on January 1, 2011 for new and materially modified arrangements originating after December 31, 2010.
Prior to the Company’s adoption of ASU No. 2009-14, the Company primarily recognized revenues using the revenue recognition criteria of Accounting Standards Codification (“ASC”) Subtopic 985-605, Software-Revenue Recognition. As a result of the Company’s adoption of ASU No. 2009-14 on January 1, 2011, a majority of the Company’s products are now considered non-software elements under U.S. GAAP, which excludes them from the scope of ASC Subtopic 985-605 and includes them within the scope of ASC Topic 605, Revenue Recognition. Because the Company had not been able to establish VSOE of fair value for Implied Maintenance Release PCS, as described further below, substantially all revenue arrangements prior to January 1, 2011 were recognized on a ratable basis over the service period of Implied Maintenance Release PCS. Subsequent to January 1, 2011 and the adoption of ASU No. 2009-14, the Company determines a relative selling price for all elements of the arrangement through the use of BESP, as VSOE and TPE are typically not available, resulting in revenue recognition upon delivery of arrangement consideration attributable to product revenue, provided all other criteria for revenue recognition are met, and revenue recognition of Implied Maintenance Release PCS and other service and support elements over time as services are rendered.
Revenue Recognition of Non-Software Deliverables
Revenue from products that are considered non-software deliverables is recognized upon delivery of the product to the customer. Products are considered delivered to the customer once they have been shipped and title and risk of loss has been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped. Revenue from support that is considered a non-software deliverable is initially deferred and is recognized ratably over the contractual period of the arrangement, which is generally 12 months. Professional services and training services are typically sold to customers on a time and materials basis. Revenue from professional services and training services that are considered non-software deliverables is recognized for these deliverables as services are provided to the customer. Revenue for Implied Maintenance Release PCS that is considered a non-software deliverable is recognized ratably over the service period of Implied Maintenance Release PCS, which ranges from one to eight years.
Revenue Recognition of Software Deliverables
The Company recognizes the following types of elements sold using software revenue recognition guidance: (i) software products and software upgrades, when the software sold in a customer arrangement is more than incidental to the arrangement as a whole and the product does not contain hardware that functions with the software to provide essential functionality, (ii) initial support contracts where the underlying product being supported is considered to be a software deliverable, (iii) support contract renewals and (iv) professional services and training that relate to deliverables considered to be software deliverables. Because the Company does not have VSOE of the fair value of its software products, the Company is permitted to account for its typical customer arrangements that include multiple elements using the residual method. Under the residual method, the VSOE of fair value of the undelivered elements (which could include support, professional services or training, or any combination thereof) is deferred and the remaining portion of the total arrangement fee is recognized as revenue for the delivered elements. If evidence of the VSOE of fair value of one or more undelivered elements does not exist, revenues are deferred and recognized when delivery of those elements occurs or when VSOE of fair value can be established. VSOE of fair value is typically based on the price charged when the element is sold separately to customers. The Company is unable to use the residual method to recognize revenues for some arrangements that include products that are software deliverables under U.S. GAAP since VSOE of fair value does not exist for Implied Maintenance Release PCS elements, which are included in some of the Company’s arrangements.
For software products that include Implied Maintenance Release PCS, an element for which VSOE of fair value does not exist, revenue for the entire arrangement fee, which could include combinations of product, professional services, training and support, is recognized ratably as a group over the longest service period of any deliverable in the arrangement, with recognition commencing on the date delivery has occurred for all deliverables in the arrangement (or begins to occur in the case of professional services, training and support). Standalone sales of support contracts are recognized ratably over the service period of the product being supported.
From time to time, the Company offers certain customers free upgrades or specified future products or enhancements. When a software deliverable arrangement contains an Implied Maintenance Release PCS deliverable, revenue recognition of the entire arrangement will only commence when any free upgrades or specified future products or enhancements have been delivered, assuming all other products in the arrangement have been delivered and all services, if any, have commenced.
Recently Adopted Accounting Pronouncement
In January 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-04,
Simplifying the Test for Goodwill Impairment.
The guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company adopted the revised guidance during the first quarter of 2017. The adoption of ASU 2017-04 had no immediate impact on the Company’s condensed consolidated financial statements upon adoption, however, it could impact the calculation of goodwill impairments in future periods.
Recent Accounting Pronouncements to be Adopted
In May, 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606).
ASU No. 2014-09 is the final updated standard on revenue recognition. The standard supersedes the most current revenue recognition guidance, including industry-specific guidance. The new revenue recognition guidance becomes effective for the Company on January 1, 2018, and early adoption as of January 1, 2017 is permitted.
Subsequently, the FASB has issued the following standards related to ASU No. 2014-09: ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations;
ASU No. 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
; and ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
. The Company must adopt ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 with ASU No. 2014-09 (collectively, the “new revenue standards”).
Entities have the option of using either a full retrospective or a modified approach to adopt the new revenue standards. The Company expects to elect the modified transition method and, while the Company is still in the process of evaluating the impact of this new accounting standard, it expects the impact will be significant. The adoption will result in a significant cumulative reduction in deferred revenue as of January 1, 2018 because the Company will no longer require VSOE of fair value to recognize software deliverables with Implied Maintenance Release PCS upon delivery. Upon adoption of ASC 606, the Company expects to recognize a greater proportion of revenue upon delivery of its products, whereas some of the Company’s current product sales are initially recorded in deferred revenue and recognized over a long period of time (as described in detail in the “Significant Accounting Policies - Revenue Recognition” section above). Accordingly, the Company’s operating results may become more volatile as a result of the adoption.
On February 25, 2016, the FASB issued ASU No. 2016-02,
Leases (Topic (842)
. The guidance requires an entity to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The new guidance becomes effective for the Company on January 1, 2019, and early adoption is permitted upon issuance. The Company is evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flow (Topic 230)
. The guidance reduces diversity in how certain cash receipts and cash payments are presented and classified in the Statements of Cash Flows. Certain of ASU No. 2016-15 requirements are as follows: (i) cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities, (ii) contingent consideration payments made soon after a business combination should be classified as cash outflows for investing activities and cash payment made thereafter should be classified as cash outflows for financing up to the amount of the contingent consideration liability recognized at the
acquisition date with any excess classified as operating activities, (iii) cash proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss, (iv) cash proceeds from the settlement of Corporate-Owned Life Insurance (“COLI”) Policies should be classified as cash inflows from investing activities and cash payments for premiums on COLI policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities and (v) cash paid to a tax authority by an employer when withholding shares from an employee's award for tax-withholding purposes should be classified as cash outflows for financing activities. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard.
In October 2016, the FASB issued ASU No. 2016-16,
Income Taxes (Topic 740)
. The guidance requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transfer occurs. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the impact of the adoption of ASU No. 2016-16 on its financial statements, as well as timing of its adoption of the standard.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash.
The guidance requires companies to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, companies will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard.
Net income per common share is presented for both basic income per share (“Basic EPS”) and diluted income per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common share equivalents outstanding during the period.
The potential common shares that were considered anti-dilutive securities were excluded from the diluted earnings per share calculations for the relevant periods either because the sum of the exercise price per share and the unrecognized compensation cost per share was greater than the average market price of the Company’s common stock for the relevant period, or because they were considered contingently issuable. The contingently issuable potential common shares result from certain stock options and restricted stock units granted to the Company’s employees that vest based on performance conditions, market conditions, or a combination of performance and market conditions.
The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities at
September 30, 2017
and for the
nine months ended
September 30, 2016
.
|
|
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|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
Options
|
2,334
|
|
|
3,939
|
|
Non-vested restricted stock units
|
3,289
|
|
|
687
|
|
Anti-dilutive potential common shares
|
5,623
|
|
|
4,626
|
|
On June 15, 2015, the Company issued
$125.0 million
aggregate principal amount of its
2.00%
Convertible Senior Notes due 2020 (the “Notes”). The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment. In connection with the offering of the Notes, the Company entered into a capped call transaction with a third party. The Company uses the treasury stock method in computing the dilutive impact of the Notes. The Notes are convertible into
shares of the Company’s common stock but the Company’s stock price was less than the conversion price as of
September 30, 2017
, and, therefore, the Notes are excluded from Diluted EPS. The Capped Call is not reflected in diluted net income per share as it will always be anti-dilutive.
|
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3.
|
FAIR VALUE MEASUREMENTS
|
Assets Measured at Fair Value on a Recurring Basis
The Company measures deferred compensation investments on a recurring basis. As of
September 30, 2017
and
December 31, 2016
, the Company’s deferred compensation investments were classified as either Level 1 or Level 2 in the fair value hierarchy. Assets valued using quoted market prices in active markets and classified as Level 1 are money market and mutual funds. Assets valued based on other observable inputs and classified as Level 2 are insurance contracts.
The following tables summarize the Company’s deferred compensation investments measured at fair value on a recurring basis (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
September 30,
2017
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Financial assets:
|
|
|
|
|
|
|
|
Deferred compensation assets
|
$
|
1,838
|
|
|
$
|
460
|
|
|
$
|
1,378
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
December 31, 2016
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Financial assets:
|
|
|
|
|
|
|
|
Deferred compensation assets
|
$
|
2,035
|
|
|
$
|
493
|
|
|
$
|
1,542
|
|
|
$
|
—
|
|
Financial Instruments Not Recorded at Fair Value
The carrying amounts of the Company’s other financial assets and liabilities including cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement. As of
September 30, 2017
, the net carrying amount of the Notes was
$106.1 million
, and the fair value of the Notes was approximately
$95.1 million
based on open market trading activity, which constitutes a Level 1 input in the fair value hierarchy.
Inventories consisted of the following (in thousands):
|
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|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
Raw materials
|
$
|
11,518
|
|
|
$
|
10,481
|
|
Work in process
|
300
|
|
|
291
|
|
Finished goods
|
29,342
|
|
|
39,929
|
|
Total
|
$
|
41,160
|
|
|
$
|
50,701
|
|
As of
September 30, 2017
and
December 31, 2016
, finished goods inventory included
$9.5 million
and
$8.6 million
, respectively, associated with products shipped to customers and deferred labor costs for arrangements where revenue recognition had not yet commenced.
|
|
5.
|
INTANGIBLE ASSETS AND GOODWILL
|
Amortizing identifiable intangible assets related to the Company’s acquisitions or capitalized costs of internally developed or externally purchased software that form the basis for the Company’s products consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
Completed technologies and patents
|
$
|
58,562
|
|
|
$
|
(45,074
|
)
|
|
$
|
13,488
|
|
|
$
|
57,994
|
|
|
$
|
(38,657
|
)
|
|
$
|
19,337
|
|
Customer relationships
|
54,906
|
|
|
(52,399
|
)
|
|
2,507
|
|
|
54,597
|
|
|
(51,002
|
)
|
|
3,595
|
|
Trade names
|
1,346
|
|
|
(1,346
|
)
|
|
—
|
|
|
1,346
|
|
|
(1,346
|
)
|
|
—
|
|
Capitalized software costs
|
4,911
|
|
|
(4,911
|
)
|
|
—
|
|
|
4,911
|
|
|
(4,911
|
)
|
|
—
|
|
Total
|
$
|
119,725
|
|
|
$
|
(103,730
|
)
|
|
$
|
15,995
|
|
|
$
|
118,848
|
|
|
$
|
(95,916
|
)
|
|
$
|
22,932
|
|
Amortization expense related to all intangible assets in the aggregate was
$2.3 million
and
$2.5 million
, respectively, for the three months ended
September 30, 2017
and
2016
, and
$6.9 million
and
$8.0 million
, respectively, for the
nine months ended
September 30, 2017
and
2016
. The Company expects amortization of acquired intangible assets to be
$2.3 million
for the remainder of
2017
,
$9.3 million
in
2018
and
$4.4 million
in
2019
.
The acquisition of Orad in 2015 resulted in goodwill of
$32.6 million
as of
September 30, 2017
and
December 31, 2016
.
|
|
6.
|
OTHER LONG-TERM LIABILITIES
|
Other long-term liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
Deferred rent
|
$
|
3,292
|
|
|
$
|
5,458
|
|
Accrued restructuring
|
843
|
|
|
1,256
|
|
Deferred compensation
|
5,591
|
|
|
5,464
|
|
Total
|
$
|
9,726
|
|
|
$
|
12,178
|
|
|
|
7.
|
COMMITMENTS AND CONTINGENCIES
|
Commitments
The Company entered into a long-term agreement to purchase a variety of information technology solutions from a third party in the second quarter of 2017, which included an unconditional commitment to purchase a minimum of
$12.8 million
of products and services over the initial
three
-year term of the agreement.
The Company has letters of credit that are used as security deposits in connection with the Company’s leased Burlington, Massachusetts office space. In the event of default on the underlying leases, the landlords would, at
September 30, 2017
, be eligible to draw against the letters of credit to a maximum of
$1.3 million
in the aggregate. The letters of credit are subject to aggregate reductions provided the Company is not in default under the underlying leases and meets certain financial performance conditions. In no case will the letters of credit amounts be reduced to below
$1.2 million
in the aggregate throughout the lease periods, all of which extend to May 2020.
The Company also has letters of credit in connection with security deposits for other facility leases totaling
$1.1 million
in the aggregate, as well as letters of credit totaling
$1.2 million
that otherwise support its ongoing operations. These letters
of credit have various terms and expire during
2017
and beyond, while some of the letters of credit may automatically renew based on the terms of the underlying agreements.
Contingencies
The Company’s industry is characterized by the existence of a large number of patents and frequent claims and litigation regarding patent and other intellectual property rights. In addition to the legal proceedings described below, the Company is involved in legal proceedings from time to time arising from the normal course of business activities, including claims of alleged infringement of intellectual property rights and contractual, commercial, employee relations, product or service performance, or other matters. The Company does not believe these matters will have a material adverse effect on the Company’s financial position or results of operations. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. Therefore, the Company’s financial position or results of operations may be negatively affected by the unfavorable resolution of one or more of these proceedings for the period in which a matter is resolved. The Company’s results could be materially adversely affected if the Company is accused of, or found to be, infringing third parties’ intellectual property rights.
On October 30, 2017 the Company entered into settlement and patent cross-licensing agreements with Harmonic Inc. (“Harmonic”), ending its patent infringement litigation against Harmonic which commenced in 2011. Under the terms of the agreements, Harmonic will pay the Company
$6.0 million
. The first payment of
$2.5 million
was made on October 24, 2017; the remaining
$3.5 million
will be paid in two installments of
$1.5 million
and
$2.0 million
in 2019 and 2020, respectively. The Company will record a gain associated with the settlement of past patent infringements in the fourth quarter of 2017.
In November 2016, a purported securities class action lawsuit was filed in the U.S. District Court for the District of Massachusetts (Mohanty v. Avid Technology, Inc. et al., No. 16-cv-12336) against the Company and certain of its executive officers seeking unspecified damages and other relief on behalf of a purported class of purchasers of the Company’s common stock between August 4, 2016 and November 9, 2016, inclusive. The complaint purported to state a claim for violation of federal securities laws as a result of alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“the Exchange Act”) and Rule 10b-5 promulgated thereunder. The complaint’s allegations relate generally to the Company’s disclosure surrounding the level of implementation of the Company’s Avid NEXIS solution product offerings. On February 7, 2017, the Court appointed a lead plaintiff and counsel in the matter. On June 14, 2017, the Company moved to dismiss the action. On July 31, 2017, the lead plaintiff filed an opposition to the Company’s motion to dismiss, and on August 21, 2017, the Company filed its reply brief. On October 13, 2017, after a mediation, the parties reached an agreement in principle to settle this litigation. The Company expects the majority of the settlement to be funded by its insurers. Finalization of the settlement is subject to a number of conditions, including execution of definitive documentation and approval by the court.
The Company considers all claims on a quarterly basis and based on known facts assesses whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure requirements and whether to accrue for such claims in its consolidated financial statements. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.
At
September 30, 2017
and as of the date of filing of these consolidated financial statements, the Company believes that, other than as set forth in this note, no provision for liability nor disclosure is required related to any claims because: (a) there is no reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim, (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.
Additionally, the Company provides indemnification to certain customers for losses incurred in connection with intellectual property infringement claims brought by third parties with respect to the Company’s products. These indemnification provisions generally offer perpetual coverage for infringement claims based upon the products covered by the agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions is theoretically unlimited. To date, the Company has not incurred material costs related to these indemnification provisions; accordingly, the Company believes the estimated fair value of these indemnification provisions
is immaterial. Further, certain of the Company’s arrangements with customers include clauses whereby the Company may be subject to penalties for failure to meet certain performance obligations; however, the Company has not recorded any related material penalties to date.
The Company provides warranties on externally sourced and internally developed hardware. For internally developed hardware, and in cases where the warranty granted to customers for externally sourced hardware is greater than that provided by the manufacturer, the Company records an accrual for the related liability based on historical trends and actual material and labor costs. The following table sets forth the activity in the product warranty accrual account for the
nine months ended
September 30, 2017
and
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2017
|
|
2016
|
Accrual balance at beginning of year
|
$
|
2,518
|
|
|
$
|
2,234
|
|
Accruals for product warranties
|
1,872
|
|
|
1,992
|
|
Costs of warranty claims
|
(1,897
|
)
|
|
(1,872
|
)
|
Accrual balance at end of period
|
$
|
2,493
|
|
|
$
|
2,354
|
|
The warranty accrual is included in the caption “accrued expenses and other current liabilities” in the Company’s condensed consolidated balance sheet.
|
|
8.
|
RESTRUCTURING COSTS AND ACCRUALS
|
In February 2016, the Company committed to a restructuring plan that encompassed a series of measures intended to allow the Company to more efficiently operate in a leaner, more directed cost structure. These included reductions in the Company’s workforce, consolidation of facilities, transfers of certain business processes to lower cost regions, and reductions in other third-party services costs. The cost efficiency program was substantially complete as of
June 30, 2017
.
During the
three and nine months ended
September 30, 2017
, the Company recorded recoveries of
$0.6 million
and restructuring charges of
$6.5 million
, respectively. The restructuring charges for the
nine months ended
September 30, 2017
included
$1.0 million
for the severance costs and estimate adjustments related to approximately
64
terminated employees and
$5.4 million
for the closure of certain excess facility space, including
$3.2 million
of leasehold improvement write-offs and
$0.8 million
adjustments related to sublease assumptions associated with prior abandoned facilities.
During the
three and nine months ended
September 30, 2016
, the Company recorded restructuring charges of
$5.3 million
and restructuring charges of
$7.9 million
, respectively. During the
nine months ended
September 30, 2016
, the Company recorded restructuring charges of
$5.0 million
for the severance costs and estimate adjustments related to approximately
123
terminated employees and
$2.9 million
for the closure of certain excess facility space, including
$1.1 million
of leasehold improvement write-offs, and
$0.8 million
adjustments related to sublease assumptions associated with prior abandoned facilities.
Restructuring Summary
The following table sets forth the activity in the restructuring accruals for the
nine months ended
September 30, 2017
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-
Related
|
|
Facilities/Other-Related
|
|
Total
|
Accrual balance as of December 31, 2016
|
$
|
7,018
|
|
|
$
|
3,093
|
|
|
$
|
10,111
|
|
New restructuring charges – operating expenses
|
1,930
|
|
|
1,485
|
|
|
3,415
|
|
Revisions of estimated liabilities
|
(902
|
)
|
|
760
|
|
|
(142
|
)
|
Non-cash write-offs
|
—
|
|
|
3,191
|
|
|
3,191
|
|
Accretion
|
—
|
|
|
278
|
|
|
278
|
|
Cash payments
|
(5,479
|
)
|
|
(2,970
|
)
|
|
(8,449
|
)
|
Foreign exchange impact on ending balance
|
(46
|
)
|
|
15
|
|
|
(31
|
)
|
Accrual balance as of September 30, 2017
|
$
|
2,521
|
|
|
$
|
5,852
|
|
|
$
|
8,373
|
|
The employee-related accruals at
September 30, 2017
represent severance costs to former employees that will be paid out within 12 months, and are, therefore, included in the caption “accrued expenses and other current liabilities” in the Company’s consolidated balance sheets.
The facilities/other-related accruals at
September 30, 2017
represent contractual lease payments, net of estimated sublease income, on space vacated as part of the Company’s restructuring actions. The leases, and payments against the amounts accrued, extend through December 2021 unless the Company is able to negotiate earlier terminations. Of the total facilities/other-related balance,
$1.9 million
is included in the caption “accrued expenses and other current liabilities”,
$0.8 million
is included in the caption “other long-term liabilities”, and
$3.2 million
of fixed asset write-off is reflected in the caption “property and equipment, net” in the Company’s condensed consolidated balance sheet as of
September 30, 2017
.
|
|
9.
|
PRODUCT AND GEOGRAPHIC INFORMATION
|
The Company, through the evaluation of the discrete financial information that is regularly reviewed by the chief operating decision makers (the Company’s chief executive officer and chief financial officer), has determined that the Company has one reportable segment. The following table is a summary of the Company’s revenues by type for the
three and nine months ended
September 30, 2017
and
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Video products and solutions net revenues
|
$
|
27,058
|
|
|
$
|
39,182
|
|
|
$
|
82,585
|
|
|
$
|
118,252
|
|
Audio products and solutions net revenues
|
27,261
|
|
|
24,558
|
|
|
70,395
|
|
|
105,589
|
|
Products and solutions net revenues
|
54,319
|
|
|
63,740
|
|
|
152,980
|
|
|
223,841
|
|
Services net revenues
|
50,946
|
|
|
55,279
|
|
|
158,765
|
|
|
172,794
|
|
Total net revenues
|
$
|
105,265
|
|
|
$
|
119,019
|
|
|
$
|
311,745
|
|
|
$
|
396,635
|
|
The following table sets forth the Company’s revenues by geographic region for the
three and nine months ended
September 30, 2017
and
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
United States
|
$
|
38,624
|
|
|
$
|
45,982
|
|
|
$
|
121,309
|
|
|
$
|
145,384
|
|
Other Americas
|
7,377
|
|
|
9,702
|
|
|
20,581
|
|
|
30,674
|
|
Europe, Middle East and Africa
|
41,526
|
|
|
44,524
|
|
|
121,647
|
|
|
159,243
|
|
Asia-Pacific
|
17,738
|
|
|
18,811
|
|
|
48,208
|
|
|
61,334
|
|
Total net revenues
|
$
|
105,265
|
|
|
$
|
119,019
|
|
|
$
|
311,745
|
|
|
$
|
396,635
|
|
|
|
10.
|
LONG-TERM DEBT AND CREDIT AGREEMENT
|
Long-term debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
Term Loan, net of unamortized debt issuance costs of $3,144 at September 30, 2017 and $4,042 at December 31, 2016
|
$
|
89,356
|
|
|
$
|
92,208
|
|
Notes, net of unamortized original issue discount and debt issuance costs of $18,896 at September 30, 2017 and $23,413 at December 31, 2016, respectively
|
106,104
|
|
|
101,587
|
|
Other long-term debt
|
912
|
|
|
—
|
|
Total debt
|
196,372
|
|
|
193,795
|
|
Less: current portion
|
5,072
|
|
|
5,000
|
|
Total long-term debt
|
$
|
191,300
|
|
|
$
|
188,795
|
|
2.00% Convertible Senior Notes due 2020
On June 15, 2015, the Company issued
$125.0 million
aggregate principal amount of its Notes in an offering conducted in accordance with Rule 144A under the Securities Act of 1933. The Notes pay interest semi-annually on June 15 and December 15 of each year at an annual rate of
2.00%
and mature on June 15, 2020, unless earlier converted or repurchased in accordance with their terms prior to such date. Total interest expense for the
nine months ended
September 30, 2017
and
2016
was
$6.4 million
and
$6.1 million
, respectively, reflecting the coupon and accretion of the discount.
Credit Facility
On February 26, 2016, the Company entered into the Financing Agreement with the Lenders. Pursuant to the Financing Agreement, the Lenders originally agreed to provide the Company with (a) a term loan in the aggregate principal amount of
$100.0 million
(the “Term Loan”) and (b) a revolving credit facility (the “Credit Facility”) of up to a maximum of
$5.0 million
in borrowings outstanding at any time. All outstanding loans under the Financing Agreement will become due and payable on the earlier of February 26, 2021 and the date that is 30 days prior to June 15, 2020 if the
$125.0 million
in outstanding principal of the Notes has not been repaid or refinanced by such time.
The Company granted a security interest on substantially all of its assets to secure the obligations under the Credit Facility and the Term Loan.
The Company borrowed the full amount of the Term Loan, or
$100.0 million
, as of the closing date of the Financing Agreement, and there were
no
amounts outstanding under the Credit Facility as of
September 30, 2017
.
The Company may prepay all or any portion of the Term Loan prior to its stated maturity, subject to the payment of certain fees based on the amount repaid. The Term Loan requires quarterly principal payments of $1.25 million, which commenced in June 2016. The Term Loan also requires the Company to use 50% of excess cash flow, as defined in the Financing Agreement, to repay outstanding principal of the loans under the Financing Agreement.
The Financing Agreement contains customary representations and warranties, covenants, mandatory prepayments, and events of default under which the Company’s payment obligations may be accelerated. On March 14, 2017 (the “Amendment No. 1 Effective Date”), the Company entered into an amendment (the “First Amendment”) to the Financing Agreement. The First Amendment modified the covenant requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) total funded indebtedness to (b) consolidated EBITDA) such that following the Amendment No. 1 Effective Date, the Company is required to maintain a Leverage Ratio of no greater than 3.50:1.00 for the four quarters ended March 31, 2017, 4.20:1.00 for the four quarters ended June 30, 2017, 4.75:1.00 for the four quarters ended September 30, 2017, 4.80:1.00 for the four quarters ending December 31, 2017, 4:40:1.00 for each of the four quarters ending March 31, 2018 through March 31, 2019, respectively, and thereafter declining over time from 3.50:1.00 to 2.50:1.00.
Following the Amendment No. 1 Effective Date, interest accrues on outstanding borrowings under the credit facility and the term loan (each as defined in the Financing Agreement) at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 7.25% or a Reference Rate (as defined in the Financing Agreement) plus 6.25%, at the option of the Company.
The Company recorded
$5.9 million
and
$4.6 million
of interest expense on the Term Loan for the
nine months ended
September 30, 2017
and
2016
, respectively. As of
September 30, 2017
, the Company was in compliance with the Financing Agreement covenants.
On November 9, 2017 (the “Amendment No. 2 Effective Date”), the Company entered into an amendment (the “Second Amendment”) to the Financing Agreement. The Second Amendment extended an additional $
15.0 million
term loan to the Company, thereby increasing the aggregate principal amount of the term loan to $
115.0 million
. The Second Amendment also increased the amount of available revolving credit by $
5.0 million
to an aggregate amount of $
10.0 million
. The additional $
15.0 million
term loan must be repaid in quarterly principal payments of $
187,500
commencing in March 2018. The Second Amendment also granted the Company the ability to use up to $
15.0 million
to purchase Notes and modified the definition of consolidated EBITDA used in the Leverage Ratio calculation to adjust for expected changes in deferred revenue due to the adoption of ASC 606.
11. STOCKHOLDERS’ EQUITY
Stock-Based Compensation
Information with respect to option shares granted under all the Company’s stock incentive plans for the
nine months ended
September 30, 2017
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Time-Based Shares
|
Performance-Based Shares
|
Total Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
Aggregate
Intrinsic
Value
(in thousands)
|
Options outstanding at January 1, 2017
|
2,847,502
|
|
—
|
|
2,847,502
|
|
$10.43
|
|
|
Granted
|
—
|
|
—
|
|
—
|
|
$—
|
|
|
Exercised
|
—
|
|
—
|
|
—
|
|
$—
|
|
|
Forfeited or canceled
|
(513,285
|
)
|
—
|
|
(513,285
|
)
|
$13.49
|
|
|
Options outstanding at September 30, 2017
|
2,334,217
|
|
—
|
|
2,334,217
|
|
$9.75
|
2.51
|
$—
|
Options vested at September 30, 2017 or expected to vest
|
|
|
2,334,217
|
|
$9.75
|
2.51
|
$—
|
Options exercisable at September 30, 2017
|
|
|
2,315,467
|
|
$9.77
|
2.51
|
$—
|
Information with respect to the Company’s non-vested restricted stock units for the
nine months ended
September 30, 2017
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Restricted Stock Units
|
|
Time-Based Shares
|
Performance-Based Shares
|
Total Shares
|
Weighted-
Average
Grant-Date
Fair Value
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
Aggregate
Intrinsic
Value
(in thousands)
|
Non-vested at January 1, 2017
|
1,513,098
|
|
642,683
|
|
2,155,781
|
|
$6.85
|
|
|
Granted
|
1,130,596
|
|
639,703
|
|
1,770,299
|
|
$4.61
|
|
|
Vested
|
(538,384
|
)
|
—
|
|
(538,384
|
)
|
$7.84
|
|
|
Forfeited
|
(70,142
|
)
|
(28,276
|
)
|
(98,418
|
)
|
$6.17
|
|
|
Non-vested at September 30, 2017
|
2,035,168
|
|
1,254,110
|
|
3,289,278
|
|
$5.16
|
0.86
|
$14,900
|
Expected to vest
|
|
|
2,674,871
|
|
$5.08
|
0.86
|
$12,117
|
Stock-based compensation was included in the following captions in the Company’s condensed consolidated statements of operations for the
three and nine months ended
September 30, 2017
and
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cost of products revenues
|
$
|
14
|
|
|
$
|
12
|
|
|
$
|
39
|
|
|
$
|
43
|
|
Cost of services revenues
|
49
|
|
|
145
|
|
|
508
|
|
|
445
|
|
Research and development expenses
|
222
|
|
|
73
|
|
|
474
|
|
|
222
|
|
Marketing and selling expenses
|
582
|
|
|
547
|
|
|
1,375
|
|
|
1,508
|
|
General and administrative expenses
|
1,614
|
|
|
951
|
|
|
3,478
|
|
|
3,898
|
|
|
$
|
2,481
|
|
|
$
|
1,728
|
|
|
$
|
5,874
|
|
|
$
|
6,116
|
|